Question

Amble company reports cash of $40,000, accounts receivable of $60,000, inventory of $150,000, equipment of $350,000, and current liabilities of $100,000. what is jamble's current ratio?

A) 6.0.
B) 1.0.
C) 2.5.
D) 1.4.

Answer 1

To calculate the current ratio, divide the total current assets by the total current liabilities. In this case, the current ratio for Jamble Company is C) 2.5.

Step-by-step explanation:

To calculate the current ratio, we need to divide the total current assets by the total current liabilities. Current assets include cash, accounts receivable, and inventory. In this case, the total current assets is $40,000 (cash) + $60,000 (accounts receivable) + $150,000 (inventory) = $250,000. The total current liabilities is $100,000.

The formula for the current ratio is:

\text{Current ratio} = \frac{\text{Total current assets}}{\text{Total current liabilities}}
Substituting the values, we get:

\text{Current ratio} = \frac{250,000}{100,000} = 2.5

Therefore, the current ratio for Jamble Company is 2.5.